HH #15

If you have been monitoring the markets, you may have noticed a ton of RED recently. What has been happening?

1. Despite improving inflation data, investors are worried about further rate hikes. Many have expressed their belief that another rate hike is likely. The FED met in Jackson Hole, Wyoming this weekend to hash things out. Overall, the moto has been to do everything and anything to bring inflation below 2%, the latest report posted inflation ~3.2%.

2. Inverted yield curve. The 2-year treasury is returning 4.98% vs. the 10-year yield of 4.25%. From a risk-return perspective, this makes no sense! Longer maturity bonds should always return more yield than shorter-term bonds because investors should be compensated for duration risk. Yield curve inversion has traditionally been an indicator of a future recession as investors are expecting the FED to bring down rates to juice the economy in the long-term, forcing longer term yields to drop below short-term yields.

Now, let’s take a look at trends in recent transactions.

Finastra, a financial software company owned by Vista Equity Partners, recently refinanced their $4.8bn in debt. However, Vista got screwed!

They were forced to cut a $1.0bn equity check to get the deal done as lenders have been hesitant to lend amidst a rising rate environment where the economic outlook is uncertain. In 2020 and 2021, private equity firms such as Vista bullied lenders to commit enormous financing in the ultra low rate environment. Now, lenders have the leverage and are able to dictate terms in new deals.

We are likely to see more lender-led deals in the near future as private equity firms will be forced to refi or hand the keys over to the lenders to run their businesses. Hint: private equity firms don’t like to do this!

Maybe in the next update I can talk about something else besides rate-related news. For now, enjoy the rate analysis and appreciate how much a couple of basis points can change the economy

Banking: Nomura, LionTree, and PNC have released their full-time apps alongside a few other boutique banks. For summer analysts, B. Riley and PNC have released their apps. Societe Generale, Wells Fargo, Macquarie, and SMBC have also reopened their SA 2024 positions.

Consulting: Kearney, Booz Allen, and Charles River Associates have opened their apps. First and second rounds of MBB apps are closing, so apply soon!

Buyside: Plenty of real estate focused roles such as CF Private Equity and Woodbourne Capital Management have opened. Advent International has also kicked off their process.

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HH #15